A meeting between Nepali and Indian central banks officials to raise the exchange facility ceiling for Nepalis holding demonetised Indian currency ended inconclusively on Monday, delaying the process of replacing now-useless Indian banknotes of 500- and 1,000-rupee denominations with legal tenders.

The officials of the Reserve Bank of India (RBI) had proposed to allow Nepalis to exchange demonetised Indian banknotes worth IRs4,500 per individual during a meeting held on Sunday. After the Nepal Rastra Bank (NRB) officials declined the offer and demanded that the ceiling be raised to IRs 25,000, both the sides had agreed to sit for talks on Monday.

But Monday’s meeting could not bridge the differences, as both the sides remained firm on their stance.

“We told them it was the Indian government’s decision to allow Nepalis to hold up to IRs 25,000 in cash and asked them to raise the ceiling. But they didn’t agree to our demand,” NRB Deputy Governor Chintamani Siwakoti told the Post. “We have asked them to send us their decision in writing and they have agreed to our request.”

The NRB, according to Siwakoti, will raise the issue at higher levels once RBI formally sends its decision in writing.   

As the talks failed to find an amicable solution, the Indian team led by RBI Executive Director Deepali Pant Joshi returned back to India on Monday.

The Indian central bank team arrived in Kathmandu on Saturday to hold talks on extending exchange facility to Nepalis holding withdrawn Indian banknotes of 500- and 1,000-rupee denominations.

As per the Indian proposal, individuals possessing banned Indian bills will have to deposit them in their bank accounts before the NRB sends them to the RBI for verification. After the notes have been verified, the RBI will send back their equivalent value in other denominations. Although the NRB officials agreed to the modality presented by the RBI, it said the proposed amount was too small.

The RBI delegation has, however, agreed to exchange IRs33.6 million in banned banknotes held by Nepal’s financial system. The figure includes cash parked at banks, financial institutions and the NRB.

This is the second time an Indian team had visited Nepal to discuss exchange facility for Nepalis holding demonetised Indian banknotes. The first team had arrived here in the last week of February.  During talks held then, Indian officials had expressed fear about Nepal being used as ‘a clearing house’ to channel illegally amassed banned notes into India’s financial system.

The Indian team had returned on a positive note at that time after being assured by Nepali officials that there was no possibility of something like that happening, according to NRB.

The Indian team’s first visit to Nepal took place a month after a Nepali delegation led by NRB Deputy Governor Siwakoti visited India to discuss the issue.

The Nepali team had visited India almost two weeks after the expiration of the December 30 deadline to deposit the banned notes in Indian banks. Indian authorities refused to take any decision then, and chose to visit Nepal first.

The Indian government’s move to demonetise large denomination banknotes has caused inconvenience to many Nepalis holding such bills, especially those who earn a living by working as daily-wage labourers in India, patients visiting India for medical treatment or shoppers travelling to Indian markets to buy daily essentials.

Although the amount of demonetised Indian notes in the Nepali financial system is not very high, the actual stock is expected to be much higher because Nepalis were previously allowed to carry 500- and 1,000-rupee notes worth up to IRs25,000.